Waste Connections buying R360

The photo shows R360 Environmental Solutions facility in the Williston Basin in North Dakota. R360 Environmental acquired the facility in June. The company, which provides oilfield waste management solutions, is being acquired by Houston-based Waste Connections.

Photo By Photographer: Troy Fields/R360 Environmental Solutions

R360 Environmental Solutions operates a facility in the Eagle Ford region of Texas. Trucks are being loaded with RoadBase, its product that is used to make roadway from recycled oil field waste materials. Waste Connections announced plans to acquire R360 Environmental Solutions for $1.3 billion.

Booming oil and gas production is creating a boom in gunky mess — and a Houston-area waste company is betting $1.3 billion on the prospect of cleaning it up.

Waste Connections, which moved its headquarters from California to The Woodlands this year, will buy Houston-based R360 Environmental Solutions in a $1.3 billion cash deal announced Monday.

R360 recycles and disposes of drilling cuttings, mud, and the mix of water and chemicals used in hydraulic fracturing, when fluids are blasted into underground rocks at high pressures to free oil and gas.

The company has hundreds of customers, including the largest players in the oil industry, and has a strong emphasis on recycling, R360 CEO Troy Thacker said.

With large quantities of waste generated by shale oil production, and current and expected regulations requiring responsible disposal of materials, opportunities for growth among waste companies are substantial, he said. In an indication of that growth potential, the deal valued R360 at more than seven times its earnings before interest, taxes, depreciation and amortization.

“The regulatory environment is tightening,” Thacker said. “The large multinational oil and gas companies want the bar to be raised; they want higher environmental standards from their vendors, such as ourselves.”

Waste Connections, the third-largest solid-waste management and recycling company in the nation, focuses on suburban and rural communities, with only 2 percent of its operations oriented toward waste from oil and gas production, Chairman and CEO Ronald J. Mittelstaedt said.

The addition of R360 will expand Waste Connections' oil and gas services to more than a quarter of its overall business, he said.

“It is a specialized niche within the waste-handling business that they are a leading provider of, and I think it was really just a natural extension of what we do,” he said. Other refuse companies, including Houston-based industry giant Waste Management, have invested in oil and gas waste operations.

The opportunity for extended returns from R360's operations are expected to last as long as shale drilling activity continues, which likely will be decades, Mittelstaedt said.

R360, which has 433 employees, operates 26 facilities around the country, including at key sites in the Eagle Ford and Permian shale plays in Texas. The company also is active in Louisiana, New Mexico, North Dakota, Oklahoma and Wyoming and is projected to take in $300 million in revenue this year, Waste Connections said.

The acquisition is expected to close in the fourth quarter, with Thacker remaining as the executive in charge of R360. The company will become a subsidiary of Waste Connections, Mittelstaedt said.

The move will give an added boost to Waste Connections, which had 1.5 billion in revenues last year, but is an industry with limited opportunities for expansion, said Michael E. Hoffman, an analyst for Wunderlich Securities.